The owner of Chelsea football club and other Russian oligarchs could face
asset freezes, the Prime Minister warns as Treasury begins impact assessment
of cost to City of London

David Cameron does not rule out punishing Roman Abramovich for Russia's seizure of Crimea after he tried to push the European Union into targeting Russian oligarchs that give "material support" to Moscow.

The Telegraph understands that the Prime Minister clashed with Angela Merkel and other European leaders after he urged the EU to follow America's example by sanctioning "individuals with substantial resources and influence who provide material support".

"We certainly haven't ruled anyone out from this approach but as I say the EU approach is that you need to target people who have a direct relationship with the action that has been taken," he said, when asked about calls for sanctions against Mr Abramovich, the owner of Chelsea Football Club.

"A sham and illegal referendum has taken place at the barrel of a Kalashnikov and Russia has sought to annex Crimea. This is a flagrant breach of international law and something we will not recognise. This behaviour belongs to the Europe of the last century not this one. It cannot be ignored or we risk more serious problems in the future."

EU leaders did agree to hit Crimea with an export blockage, meaning that the annexed region will have to get a Ukrainian customs stamp before its products can be exported to Europe, a measure that will substantially increase the economic cost of the annexation for Russia.

But the Prime Minister failed to win the EU around to a commitment to hit billionaires, such as Gennady Timchenko, one of the world's largest traders in oil who has been blacklisted by the US, with asset freezes and travel bans as European countries remained divided over how to respond to the Russian actions.

Despite the risk of big losses for the City of London, Mr Cameron is keen that the EU changes the legal base of existing sanctions, which were extended by 12 names including Dimitri Rogozin, Russia's deputy prime minister, to target the finances of wealthy businessmen if Russia escalates the situation in Ukraine.

According to European diplomatic sources, the prime minister informed other EU leaders that the Treasury has begun work to estimate the cost of financial sanctions against Russia that could cost the British economy "billions, billions and billions with huge reputational costs for the City".

After difficult and tense talks in Brussels, where leaders included Mr Cameron had their mobile telephones blocked to prevent any Russian espionage of highly secret negotiations over future sanctions, the EU agreed to a blockade of a "broad range of economic areas" if there is any further aggression by Russia.

"Obviously, that must include key areas like finance, like the military, like energy," said Mr Cameron.

"I want to be clear that all of those sorts of areas, in my view, would be and should be considered. The Commission and member states now need to prepare possible targeted measures."

"Of course, Europe is 25 per cent or so reliant on Russian gas, but if you look at Gazprom's revenues, something like 50 per cent of them come from Europe, so Russia needs Europe more than Europe needs Russia and that's an important point to make."

The Prime Minister went on to warn Vladimir Putin that any moves to destabilise the east of Ukraine would lead to an economic blockade and warned Russia's president to keep his hands off countries where there are large Russian minorities, including EU and Nato member states such as Latvia, Estonia and Lithuania

"I think the general lesson people that were drawing is that if this can happen in Ukraine then we have to be clear about how unacceptable it is, otherwise we will face similar situations in similar countries with similar unacceptable behaviour," he said.

In a shot across Mr Putin's bows the EU agreed to "further strengthen the political association and economic integration with Georgia and the Republic of Moldova" by bringing forward the signing of trade deals from August to June this year.

It was the signing of the same kind of "association agreement" between the EU and Ukraine that led to the flaring up of the current crisis last November, when Russia pressured Kiev to back out at the last minute, triggering pro-European protests.

"We confirm our aim to sign the association agreements, including the deep and comprehensive free trade areas, which we initialled in Vilnius last November, no later than June 2014," said Mr Cameron.

Lord Oakeshott, a Liberal Democrat peer, also suggested that Mr Abramovich and other Russian businessmen based in London should be targeted by sanctions.

"If we were really serious about it, if Roman Abramovich, for example, as people say is very close to Putin and part of the inner circle, an asset freeze on him would really bite, even if he had to sell Chelsea," he said.